At least four in 10 marketers lengthened payment terms for at least some marketing services in the past year, according to a report today by the Association of National Advertisers.
In all, 43% of the 98 marketer respondents in the survey extended at least some payment terms for marketing services and media suppliers in the past year, though 17% had actually shortened terms in some cases. Across-the-board shifts are still relatively rare, as 90% said they made no changes in payments for at least some of their services during the year ended April 30, 2013.
|Type of Service||Lengthened Payment Terms||Kept Terms Same||Shortened Terms|
|Network Broadcast Media||23%||74%||3%|
|Local Broadcast Media||22%||74%||4%|
|Source: 2013 ANA Payment Terms Survey Report. For year ended April 30, 2013.|
Though the ANA represents marketers, the group warned of risks in extending payment terms. Its survey responses noted strained relationships with suppliers, higher prices and reduced supplier choice among reasons some marketers have actually backtracked and shortened payment terms in the past year.
Extending terms puts the livelihoods of smaller agencies, production and editorial companies and media outlets in jeopardy, the ANA said. The report cited a policy statement from the Association of Independent Creative Editors that said extended payment terms "could cripple many post-production companies" and "put them out of business."
"Client-side marketers need to consider what is fair and how they would want to be treated," the ANA report said. "If the payment terms they are suggesting to their suppliers would not be acceptable to them as suppliers, a re-think might be in order."
In a prepared statement, ANA CEO Bob Liodice that "while the ANA does not recommend any specific term or practice, we do advocate better collaboration that advances the quality of the marketer/supplier relationship and the products and services delivered."
The agency-payments issue came into focus earlier this year when the world's biggest buyer or agency services and media, Procter & Gamble Co., said it would seek to extend payment terms from 30 to 75 days in new contracts with agencies. (P&G said it would also seek to set up receivables financing for suppliers through a third party.) J&J had previously lengthened terms to as long as 75 days, and Mondelez recently followed a years-earlier move by Anheuser-Busch InBev to extend payment terms as long as 125 days.
As of last year, the average payment term reported by ANA members in the survey was 40 to 45 days for marketing services, similar to the 43 days for vendors of all sorts. Overall, 10% to 20% of respondents said they pay in 60 to 89 days, depending on the type of services, with production costs least likely to be stretched that long, and none reported taking longer than 89 days.
Marketers are most likely to have lengthened payment schedules for agencies, research firms and digital media in the past year, while payments for production, talent and agency out-of-pocket costs were least likely to have been extended and most likely to have seen terms shortened.
Finance and procurement departments are most responsible for driving the changes, survey respondents said. Marketers with procurement departments were almost twice as likely to have extended payment terms (54%) as those without procurement departments (28%) in the past year.
While 38% of respondents with procurement departments said they're very likely to change payment terms in the next year, only 9% of marketers without procurement departments said so.
Improving cash flow and increased upper-management focus on marketing costs were the two reasons most often cited for extending payment terms. Only 22% cited slower payment from their own customers as justification, though 30% said their companies have, in fact, seen their payment terms extended by customers.